AIB chairman says bank remains on track to make outright profit next year

AIB chairman David Hodgkinson told shareholders yesterday that it is working towards making an outright profit next year and has sufficient capital to meet its regulatory requirements.

“We still aim to generate a pre-provision profit in 2013 and return to post-provision profitability during 2014,” Mr Hodgkinson told a poorly attended annual meeting in Ballsbridge. “And based on AIB’s core tier 1 position of 15 per cent at the end of March 2013, the bank is more than adequately capitalised at this time.”

AIB is required by the Central Bank of Ireland to hold a 10.5 per cent core tier 1 ratio.

Mr Hodgkinson said 80 per cent of AIB’s mortgages on principle dwelling homes and about 65 per cent of buy-to-let mortgages “continued to perform at the end of 2012”.

He said the bank’s strategy in relation to arrears was to “keep people in their homes, wherever possible, where mortgage payments are being prioritised and customers are co-operating with the bank to reach a solution”.

Mr Hodgkinson said AIB intends to meet and even “exceed” the Central Bank’s published targets for sustainable mortgage solutions.

When asked to give more details on how many people were in arrears and on how much has been written off by the bank, chief executive David Duffy said more information would be provided when the bank publishes its half-year results on August 1st.

AIB approved €1.5 billion in mortgage lending last year, surpassing its target by €1 billion. It approved 70 per cent of applications and had a 46 per cent share of the mortgage market last year.

Mr Hodgkinson said the restructuring of SME debt was “progressing well”. About 1,000 staff are assisting SME customers in financial difficulty, he added.

Shareholders were told that AIB provided €4.8 billion in lending to 31,500 SMEs in 2012, well ahead of the €3.5 billion target set by the Government.

Mr Duffy said that just more than €1 billion of this was new lending to customers, with the balance renewals or restructuring of existing borrowings.

Mr Hodgkinson a “minimum” 2,500 staff will have left the bank by the end of 2014 as part of the bank’s plan to reduce its cost base by €350 million. He said “advanced discussions” with trade unions were taking place with a view to closing its defined benefit pension scheme to future accrual.

He said the support of the Irish taxpayer “cannot be overstated” and said AIB’s “constant focus” was on ensuring that a return will be made to the State over time”.